Venezuela to Have Two Units of Account – Petro and Petro-Pegged Bolivar

President Maduro’s Venezuela is preparing to effectively adopt next week two official units of account – the nation’s crypto, El Petro, and the new petro-pegged bolivar that will replace the inflated national fiat. New salary and pricing mechanisms will be implemented as well, the country’s leftist leader promised.

Venezuela Introduces Crypto-Pegged Bolivar on Monday

Starting from August 20, Venezuela will have two official units of account – the state-issued, oil-backed cryptocurrency, the petro, and the new petro-pegged, denominated bolivar, comments from President Nicolás Maduro confirmed. In a televised address, published also on Twitter, the Venezuelan head of state said: “As of next Monday, Venezuela will have a second unit of account based on the price, the value of the petro. […] it will begin to operate as the mandatory unit of account for our PDVSA oil company.”

As previously revealed, Venezuelan authorities are issuing a new version of the national fiat currency. The “sovereign bolivar” will have five zeros less than the highly depreciated “strong bolivar”, whose inflation may exceed 1 million percent by the end of this year, according to the projections of the IMF. The banknotes of the denominated bolivar are expected to enter circulation within a week. Quoted by ABC Internacional, the president explains that Venezuela will have the “petro” and the “sovereign bolivar” as units of account from August 20, when the monetary conversion will take effect.

On Monday, Maduro said that Banco Central de Venezuela (BCV), the country’s central bank, will begin to publish official figures for the value of the sovereign bolivar in petro and the value of the national crypto in international currencies. Without further elaborating, the Venezuelan head of state ordered his ministers responsible for the economy to explain the measures to the public this week. “Venezuela is going to have a real, official indicator […] so that the speculation with the Venezuelan currency comes to an end,” Maduro said.

Crypto-Anchored Salaries and Prices?

To facilitate a smooth transition, the government has declared Monday, August 20, a non-working day, local media reported. Both the sovereign and the strong bolivar will circulate together for some time before the old currency is phased out. Nicolás Maduro assured Venezuelans that the BCV and the other public and private banks already have the new banknotes and are actively adapting to implement the changes.

The Venezuelan president also said authorities were preparing to introduce and clarify new mechanisms for determining salaries and prices of goods and services, again anchored to the petro. In his words, they will lead to a substantial improvement in the incomes of Venezuelan workers and the restoration of the price ceiling mechanism in retail.

As noted in the report, the oil-backed petro has been theoretically available for use in payments in the country since April. Caracas has also announced four special economic zones where goods and services can be paid with the national cryptocurrency, but the scale of the transactions carried out so far is unknown.

The details of the upcoming monetary conversion are revealed after reports that the Venezuelan National Constituent Assembly is preparing a reform to the country’s Constitution that would include the establishment of a central bank for cryptocurrencies. The institution is expected to take responsibility for the exchange, monetary and financial policy related to crypto assets.

What are your expectations for the future and the effects of Maduro’s monetary reforms in Venezuela? Share your thoughts on the subject in the comments section below.

Images courtesy of Shutterstock.

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